State pension and long term care reforms – a Queen’s speech of some substance

8th May 2013

This is a “thin Queen’s Speech” many commentators intone, as they envisage the twilight years of the Coalition. They suggest a lack of agreement about what to do next between the two ruling parties has hamstrung the Government.

The right in particular would have liked to have seen something significant about redefining the UK’s relationship with the EU. However, the speech reported here in the Telegraph, will introduce two hugely significant measures. The first is the upgrading (on some calculations for some people) and flattening of the state pension – in principle a good move, but with all manner of devilish detail involved. Problems include a potential national insurance increase for members of defined benefit schemes and their employers who will pay more National Insurance. This is likely to speed up the demise of such schemes.

The new system should allow women and carers in particular to get a higher basic state pension. But it is also likely to leave a lot of people confused about how their earnings related pensions such as SERPs and the State Second Pension fit with the new system. Some people may have the opportunity to contribute more. For those with many years of earnings ahead of them, the state pension gets simpler but actually in the long run a little less generous as it is upgraded to £155 a week. Mindful Money will be looking at the issue when we get more of the detailed legislation.

The second big change is the long term care shake up. Under a new set of proposals, no-one will have to pay more than £72,000 in care costs, placing a cap on potential debts built up with their local authority when they go into care. It should mean that fewer families will have to sell the family home to ultimately pay for that care, though once again the devil will be in the detail. It is still likely to be very expensive for all but the poorest in society to pay for care. It remains to be seen whether it really ends forced house sales.

But whatever these changes represent, they are not small beer. In terms of the impact on people’s lives, these two bills are brim full tankards.

Whether you like it or not, and whether you think these two bills really address the complicated challenges of the state pension system and the long term care system, these issues are exactly the sort of problems Governments should be grappling with. That applies whether ministers from different parties are talking to each other or not. Westminster watchers, when they rate the speech, should give a thought to the world outside of SW1.